BlockFi is urging the court to approve the payment of bonuses as the crypto lender struggles to retain staff following its filing for Chapter 11 bankruptcy protection.
“Despite an incredibly turbulent time in the digital asset industry, the opportunities for participants elsewhere have not dried up,” Chief People Officer Megan Crowell said in a declaration filed Monday. “The war for talent remains active and the participants have many opportunities inside and outside the cryptocurrency sector.”
The bankrupt crypto lender filed a motion on Nov. 28 with the U.S. Bankruptcy Court in the District of New Jersey to approve a retention program for remaining critical employees. The program plans to offer top staff compensation of either 50% or 10% of base salary, depending on their role.
Both the U.S. Trustee and the official committee of unsecured creditors have submitted objections to the motion. The hearing for the motion has been rescheduled numerous times, and today’s declaration states that the committee of unsecured creditors is seeking an even longer delay.
“While we felt these extensions prudent to allow for dialogue with the U.S. Trustee and the Committee, we have experienced both additional personnel loss and increased concern regarding the receipt (and timing) of retention payments,” said Crowell in the declaration.
A bidding war for talent
Since the petition date on Nov. 28 and the declaration filing on Jan. 23, 11 employees have resigned, with the pace accelerating in January, according to the declaration. This is despite the widespread turmoil facing the industry, where many crypto companies are laying off a significant portion of staff.
“Key employees continue to receive offers, in some instances, for compensation significantly above their current compensation,” said Crowell, highlighting that employees have moved to firms such as Google, Block Inc. and Walmart.
Crowell became BlockFi’s chief people officer in October and is now responsible for overseeing staff reductions and the retention program. She joined BlockFi in 2019 and “personally built BlockFi’s human resources infrastructure, including BlockFi’s recruitment team,” according to the declaration. Her belief is that the approval of the retention program is necessary to prevent further attrition, which would place “unsustainable” strain on BlockFi.
Execs land on their feet
It’s not just BlockFi that is seeing demand for its employees. Top executives from other collapsed crypto companies are also landing on their feet. Last week, Brett Harrison, the former president of collapsed crypto exchange FTX U.S., raised $5 million for his new startup, while former executives from Genesis, a trading firm whose lending arm just filed for bankruptcy, raised millions for a new crypto hedge fund, according to CNBC.
BlockFi implemented a retention program when the emergency restructuring transaction with FTX wiped out the executives’ equity stakes. When BlockFi filed for bankruptcy, the program was cancelled.
“The retention programs were designed, in part, to address that hole given extreme frustration from the employee base about the loss of bonus opportunities (on the back of prior frustration about losing equity),” said Crowell. “Thus, if the retention programs are not approved, employees that decided to stay based on the retention program will almost certainly leave.”
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